Partnerships are smart business decisions and are crucial to sustenance and success. They are collaborative actions meant to strengthen business establishments while offering opportunities to improve profit margins. It’s no wonder that 44% of these outfits seek alliances to propel growth and become stronger than their competitors. However, certain considerations must be made before a business enters a partnership. These are the key points to consider before agreeing to a business alliance.
- Shared vision and goals
There cannot be two captains of a ship, and this saying also applies to business. Business partners must have a shared vision and goals to avoid conflict. A unified vision will ensure the company is steered in the right direction, with no room for future disputes. The best way to align your vision and goals is to discuss long and short-term aspirations for the business. Once again, laying all strengths and weaknesses on the table will be essential. Since you’re joining forces, truth is a key element you cannot keep away from each other.
Business partnerships often go awry due to opposing priorities, breakdown in trust, financial inequity, and miscommunication. Fortunately, working on these negatives can make implementing shared vision and goals run smoothly. Sometimes, unmanaged power dynamics can stifle shared vision and goals. For example, when a bigger company partners with a smaller establishment, the former may want to exert more control. By doing that, the bigger business wants its priorities to be followed more than anyone else’s. That cannot be good for the partnership, so it pays to be wary of that.
- Clear roles and responsibilities
When two or more businesses come together in the marketplace, they must define clear roles and responsibilities. Each partner usually has a distinct set of tasks that align with their business strengths. Three elements that come to the fore are skills, experience, and expertise. By assessing each other’s core competencies, it becomes easier to allocate roles and responsibilities while preventing duplication of duties. Can you imagine what would happen if the company had no distinct roles and responsibilities after a partnership? There will be no clear-cut direction for the business, and the establishment stands a high risk of losing lucrative contracts. The power imbalance can work against roles and responsibilities. One way to avoid role confusion and responsibility duplication is to pay critical attention to the contract. Many business partnerships come into being after signing a binding document, otherwise known as a contract. This legal document contains relevant information on how much of the firm each entity owns. There is also information on how profit and losses would be shared. In the event of a premature death, a well-drafted contract must also contain direction. All these indicate how crucial it is to explore what is contract law and more.
- Exit strategy and contingency plans
Sometimes, business partnerships are fraught with challenges that cannot be sidestepped. When that happens, the best way to resolve it is for the entities to go their separate ways. As unpleasant as this may sound, it is a reality you must prepare for if the inevitable happens. That is why a robust exit strategy and contingency plan are useful to the business partnership contract. It is mandatory to discuss this in the early stages of the partnership and, more importantly, to factor it into the contract. All parties must agree on the exit strategy and contingency plans, as it’s the only way to avoid disputes when the partnership is no more. Business partnership experts say it’s necessary to discuss this as something already happening. In other words, state your expectations, dislikes, fears, and anything else worth mentioning if the partnership breaks up. An objective and candid approach to this discussion is the best way to make your thoughts known to each other.
- Consult an attorney to draw up legal documents
The worst thing you can do in a business partnership is to have a verbal agreement. The danger with these undocumented agreements is the high risk of one party backing out in mid-partnership, leaving you to suffer the financial consequences. That will be an unpleasant issue if it happens to you and your business. A corporate attorney is experienced with drafting legally binding documents regarding business partnerships. They know which legal tools to incorporate into the contract to ensure everybody’s interests are protected. Consulting an attorney also protects all business assets, particularly where future partnerships may be involved. It’s worth pointing out that if one partnership fails, another might be around the corner. The attorney will ensure your business’s reputation is safeguarded for future purposes.